The More Trump Fails, the Better Off We’ll Be

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The Trump administration has gone to war against independent sources of information that pose a challenge to its policy goals and the narratives it tells to support them. One of the most recent targets is the Congressional Budget Office.

Last week, Donald Trump’s budget director, Mick Mulvaney, criticized the CBO’s estimate that 23 million people would lose health insurance if the Republican health care plan were to be enacted: “If the same person is doing the score of undoing Obamacare who did the scoring of Obamacare in the first place, my guess is that there is probably some sort of bias in favor of a government mandate.” He went on to claim that the CBO is a partisan organization, and other Republicans defended him by arguing that the CBO’s estimates of insurance coverage under Obamacare were overly optimistic and biased in favor of the Obama administration.

In responding to this, it’s useful to remember why Congress created the CBO in the first place. As Peter Suderman explains, the problem Congress was trying to solve was “a powerful executive branch with incentives to offer conveniently misleading, overly rosy projections about the costs and budgetary impacts of major federal expenses like war and entitlements.

Congressional frustration boiled over during the Nixon administration … and the Congressional Budget Office was born.” Suderman goes on to conclude, “Basically, the CBO was created as a budgetary power center that could check the influence of the administration’s Office of Management and Budget (OMB).”

It’s telling that Mulvaney is the Director of the OMB, and the administration’s budget is a prime example of “overly rosy” projections – with double-counting thrown in for good measure. It’s not hard to imagine why the Trump administration would want to malign the CBO and gain the ability “to offer conveniently misleading” information about the impact of repealing Obamacare, tax cuts for the wealthy, and so on.

But what about the claim that the CBO made inaccurate predictions about Obamacare and hence should be ignored? For example, Tom Price, Trump’s Health and Human Services secretary, dismissed the CBO’s estimates with, “The CBO was wrong when they analyzed Obamacare's effect on cost and coverage, and they are wrong again.” Republican Senate Majority Whip John Cornyn called it “fake news.”

It is rare for a forecast of this type to be exactly right. A forecast of 28.73 is incorrect if the true value turns out to be 28.74, so saying a forecast was wrong tells us little. The question is whether the error was large and consequential, and if so, why?

In March of 2010, the CBO forecast that the uninsured rate for the non-elderly would fall from 18.2% in 2010 to 7.6 percent in 2016. The actual rate in 2016 was 10.4%. Importantly, however, the 7.6 percent estimate assumed that all states would expand Medicaid coverage. When the Supreme Court ruled – after the CBO forecasts had already been made – that Medicaid expansion was up to the states, 19 states chose not to expand coverage even though it would be funded by federal money. Had these states expanded coverage rather than engaging in political warfare against Obamacare, the uninsured rate would have fallen much more (according to the Urban Institute, 4 to 5 million more people would have gained coverage).

Republicans are criticizing the CBO for a forecast error they caused through political maneuvering. When the CBO estimate is adjusted for the consequences of the Supreme Court decision and the 19 states that refused federal help, the estimate of the uninsured rate in 2016 is 9.3 percent, fairly close to the actual rate of 10.4 percent.

As for the CBO’s forecast of the costs of Obamacare, costs have been lower than projected, so it’s hard to claim CBO bias toward the Obama administration. Finally, the “CBO’s 2010 premium projections were remarkably accurate: within 1 percent of actual average 2017 marketplace premiums.” The one place the CBO missed by quite a bit is in its estimate of the number of people that would shift from employer-based coverage to marketplace enrollment, but the CBO was careful to note this estimate was highly uncertain.

The Trump administration suffers from political myopia – caring only about the immediate political gains with little regard for the long-run consequences – along with a willingness to mislead, tear down institutions, and ignore political boundaries to achieve its goals. So long as Trump survives the next 4 to 8 years (and promotes his business interests along the way), who cares what happens after that? Pulling out of the Paris agreement is a good example of this behavior, but undermining the courts, the CBO, intelligence agencies, government statistics, independent media, and who knows what next, while staffing other key government positions with people loyal to the president rather than the jobs they are supposed to do will damage the nation’s future.

And all of this may not even get Trump what he wants. Republican Senators are “publicly pessimistic about their prospects of repealing and replacing Obamacare,” and that will endanger Republican plans to pay for tax cuts for the wealthy by taking health insurance from tens of millions of people.

Let’s hope this lack of success continues. The long-run damage the administration is doing to the institutions of democracy is deplorable, but the more failures Trump has in the short-run as he attempts to put his tax, social, foreign, immigration, and environmental policies into place, the better off we’ll be.

University of Oregon macroeconomist Mark Thoma writes primarily about monetary policy its effect on the economy. He has also worked on political business cycle models. Thoma blogs daily at Economist’s View.